Laiki operates as a 'branch' in the UK so customers could have been subject to a levy on savings above €100,000. They have now been transferred to Bank of Cyprus's UK arm. Photograph: Yin Gang/Xinhua/Corbis

Around 15,000 account holders at Laiki bank in the UK are to escape any levy imposed on savings by the Cypriot authorities.

As Laiki operates as a "branch" in the UK, its depositors were covered by the Cyprus government for the €100,000 (£85,000) European-wide guarantee in savings but could have been subject to levies above that level.

However, as Bank of Cyprus UK Limited is a separately capitalised, UK-incorporated bank, it is subject to UK regulation and protected by the Financial Services Compensation Scheme which guarantees up to £85,000. Its customers will not be hit by any levy on accounts – possibly 60% on accounts above £85,000 – or restrictions on limiting withdrawals to €300 a day.

Bank of Cyprus in the UK said the customers that have transferred to it "will not be subject to the imposition of any 'levy', 'haircut' or withdrawal restrictions applicable to deposits with banks in Cyprus". It was not immediately clear how many accounts were above the €100,000 threshold.

The announcement was made with the new Prudential Regulation Authority (PRA), which opens for the first time on Tuesday as a subsidiary of the Bank of England to oversee the banking sector after the Financial Services Authority was shut down over the weekend.

Customers with overdrafts remain at Laiki. "These accounts are now frozen at Laiki Bank UK and customers in overdraft will no longer have banking facilities at Laiki Bank UK," the PRA said. Mortgages and loans are not transferred either.

The PRA had been working to resolve the threat after Osborne told MPs on the Treasury select committee last week that he wanted a solution for customers of the UK arm of Laiki. Under the deal in Cyprus, Laiki is being shut down.

In Cyprus, Laiki customers with deposits below €100,000 will be transferred to Bank of Cyprus, the island's largest bank.

Osborne will say: "They represent a fundamental change in how financial services will be regulated in the future. They do away with the discredited system that failed to sound the alarm as the financial system went wrong, and put in its place a new system that puts the Bank of England back in charge and that will help ensure a strong, safe and successful financial system in Britain."